The U.S. economy has had an uneven recovery, to say the least. The stock market has largely mimicked that sentiment. Some sectors have skyrocketed in the wake of the novel coronavirus, and others took a nosedive. But there’s one thing that never goes out of fashion: quality innovative stocks.
The pandemic has accelerated a host of trends — remote working, social distancing and social media use, to name a few. Companies that have been able to capitalize on those trends are not only benefiting from a pandemic bump, but look likely to continue delivering far into the future.
With that in mind, these seven innovative stocks are worth putting on your watch list:
- Square (NYSE:SQ)
- Teladoc Health (NYSE:TDOC)
- Intuitive Surgical (NASDAQ:ISRG)
- Velodyne LiDAR (NASDAQ:VLDR)
- Okta (NASDAQ:OKTA)
- CrowdStrike (NASDAQ:CRWD)
- Pinterest (NYSE:PINS)
Innovative Stocks: Square (SQ)
Cashless payments are the future, and Square is at the center of that trend. The firm’s share price has been rising exponentially this year despite its exposure to small businesses. While there are certainly risks to SQ stock’s growth story, the firm’s impressive ability to adapt its offerings to businesses’ changing needs makes it one of the best innovative stocks long-term investors can buy.
Square’s innovation lies in two of it’s most recent add-ons: Cash App and Square Capital. Cash App follows the trajectory of several other peer-to-peer payment platforms and gives Square an in with younger generations.
Square Capital, the firm’s lending arm, is perhaps the most interesting growth driver for the company. It’s lending business got off to a running start via the Payroll Protection Program, through which SQ processed $873 million worth of loans.
Moving past the pandemic, Square Capital has the potential to become a powerhouse for Square. The firm has access to in-depth merchant data that will make its loan judgments more accurate than a traditional lender.
Square has proven itself a worthy innovator — it’s most recent addition is a table-side ordering feature that makes it easier for restaurants to operate during the pandemic. That willingness to shift quickly with the times, plus the growing market for cashless payments, makes SQ stock a buy.
Teladoc Health (TDOC)
Teladoc is another stock that has become a little expensive due to a surge in popularity. But like Square, TDOC stock still has plenty of growth left in the tank. The company’s business, which offers online doctors’ appointments, has boomed amid the pandemic. However, the shift toward remote healthcare isn’t likely to go away.
Instead, the coronavirus probably just accelerated its adoption.
Teladoc is on track to grow exponentially over the next few years, especially as it completes a merger with Livongo that is expected to improve the company’s platform significantly. What’s more, the newly combined business is planning to extend its reach to 175 countries.
Remote healthcare is likely to stick around even when the pandemic has subsided. Why? Because it’s convenient, safe and low-cost. While people are likely to celebrate the end of coronavirus restrictions, some habits will likely remain — like sanitizing, remote working and avoiding the spread of germs by isolating while sick.
Gone are the days when coming into the office with the flu is considered heroic. People will now work remotely when they’re ill. The same is true of doctor’s visits. If an in-person appointment isn’t absolutely necessary, a remote doctor’s appointment will keep the spread of illness to a minimum.
Innovative Stocks: Intuitive Surgical (ISRG)
Speaking of innovative stocks that are revolutionizing the healthcare space, Intuitive Surgical is another way to play the changing landscape. Unlike Teladoc, ISRG stock didn’t see such a sharp rise due to the pandemic, because the firm doesn’t offer any kind of pandemic protection.
However, that doesn’t mean it’s offerings aren’t incredibly innovative — and necessary. ISRG makes robotic surgical systems that make it easier to perform minimally invasive procedures. Called da Vinci Surgical Systems, the machines offer the ability to use high-definition 3D views and give surgeons a wider range of motion.
While the firm struggled through the summer as many patients put off non-essential procedures, its long-term growth story is strong. ISRG stock is a good bet on the future of healthcare.
Velodyne LiDAR (VLDR)
Velodyne LiDAR recently merged with special purpose acquisition company Graf Industrial, a move that enabled the company to trade on the Nasdaq Exchange under the ticker VLDR. Notably, VLDR is a risky play. The stock is volatile and relatively unknown.
But, if innovative stocks are what you’re after, VLDR certainly ticks that box.
The company makes laser sensors for autonomous vehicles — a segment that will undoubtedly see a ton of growth in the coming years. Mark Levine and Libbi Levine Segev, professors from the University of Denver’s Daniels College of Business, highlighted that autonomous vehicle use will reshape the future.
“This tech area is moving fast. … The average US citizen will not own a car and/or as many cars in the very near future.”
In order for AVs to be possible, though, they need to be safe. VLDR’s lasers offer that. Laser sensors can perform in conditions traditional cameras cannot, making the type of sensors VLDR makes a necessity for autonomous driving.
Innovative Stocks: Okta (OKTA)
Another sector where innovative stocks are abundant is cybersecurity. As more business operations move into the cloud and connected devices become the norm, the need for greater security capabilities is growing as well.
As Jack Ellenberg, the associate vice president of corporate partnerships and strategic initiatives at Clemson University, put it, every industry touched by technical development is now in need of greater cybersecurity.
“[The] development of new technologies, products and process has continued relatively unabated, with research focused on areas such as: smart factories/factories of the future; wearable technologies; advanced materials; artificial intelligence; big data analytics; and augmented reality. All applicable to a variety of industry sectors. While the industries may be dissimilar, especially in products developed for the consumer market, one issue prevails overall — cybersecurity. The rapid development of new products and processes … has created an urgent need to protect the data being mined from consumers, infrastructure in development and systems being built to control entire industries and products.”
Okta is one cybersecurity firm that fills that void. The company’s business model is unique in that it protects cloud networks with an individualized approach. Okta focuses on securing each individual employee rather than the network as a whole, which means one compromised account doesn’t put the whole business at risk.
While OKTA stock has been a stay-at-home winner, the firm has plenty of growth ahead as remote working and cloud-based business is likely to remain in the absence of the pandemic.
Another cybersecurity firm whose disruptive business model makes it a hot commodity is CrowdStrike. Like OKTA, CRWD stock is expensive, but for good reason. The firm uses artificial intelligence to protect its clients. If one account is hit with a cyberattack, the entire network benefits from the data obtained. The more users it accumulates, the more effective it becomes as a defense mechanism.
There are a lot of reasons to like that business model, but from an investment standpoint, it’s the scalability. As the network grows, costs are likely to remain relatively constant. Meanwhile, the service and the firm’s leg up on competitors improves. It’s a win-win for everyone involved.
“Whether it involves the utilization of cobots alongside a human workforce in a manufacturing environment or mobility technologies built into the latest vehicles to provide autonomous driving – 5G and future networks to allow transportation systems to communicate with one another or simply the proliferation of internet based transactions – the need to protect the data is paramount,” wrote Ellenberg. “We have seen firsthand the impact a data security breach can have on a company and an individual.”
While the pandemic has increased demand for cybersecurity platforms, CRWD’s business is likely to hold up once the virus subsides as well.
Innovative Stocks: Pinterest (PINS)
Social media site Pinterest may not seem like an innovative stock when you stack it up against some of the tech names on this list, but the firm is filling a gap in the social media space that could become very lucrative.
Social media has become a war among advertisers, with platforms vying for users and looking for every way to keep people within their ecosystem. Twitter (NYSE:TWTR), Facebook (NASDAQ:FB), Snapchat (NYSE:SNAP) and TikTok are all offering users a similar experience.
But Pinterest has a very different feel.
Users customize their own boards to reflect their interests, and Pinterest uses that data in order to find images they might also like. The firm incorporates advertisements into those suggestions, but it has only just begun to monetize the platform. That stands in stark contrast to the rest of the social media space, which has been monetizing for years.
By focusing on user experience and building out its network, the firm has a unique position among households’ key financial decision-makers. It’s a goldmine for advertisers.
With that in mind, PINS stock offers investors a unique play on the social media space with a firm that’s about to properly monetize its growing user base. If the firm can find a way to grow per-user revenue, it could mean big gains for shareholders.
On the date of publication, Laura Hoy held a LONG position in VLDR.
Laura Hoy has a finance degree from Duquesne University and has been writing about financial markets for the past eight years. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN.